1. Understanding the Types of Business Ownership
POB 2.01 Outline and Review
Understanding the Types of Business Ownership .

2. Main Types of Business Ownership Table
Sole Proprietorship
Partnership
Corporation
Owner(s)
One person
Two or more people
One or more shareholders (stockholders), who have one vote per share
Manager(s)
May be owner. Participate in all day-to-day operations
Determined by partnership agreement; may be one or more partners
Managers, board of directors and shareholders
Formation
Begin buying and selling goods and services
May vary by state
With a partnership agreement. Varies by state
Filing of an article of incorporation with state government

3. Sole Proprietorship
Partnership
Corporation
Advantages
Easy to form
Complete control of business
Recipient of 100% of the profit
One time taxation
More capital and credit available than a sole proprietor ship
Work load shared
Losses shared
Capital easy to obtain
Limited liability for shareholders
Unlimited lifetime
Can invest without managing day-to-day operations
Decision-making is shared
Disadvantages
Limited capital
Unlimited Liability
Limited lifetime of owner
Profits shared
Decisions made jointly
Unlimited liability depending on partnership type
Limited lifetime
Difficult to add partners
Double taxation: profits and earnings
Government regulations
More difficult to form
Operations controlled by shareholders and board of directors

4. Decision or life of owner
Sole Proprietorship
Partnership
Corporation
Termination
Decision or life of owner
Actions of the partners, bankruptcy, death, and/or court order
May have unlimited lifetime. If needed, determined by charter or article of dissolution
Source(s) of investment
Personal, gifts, borrowed, and others may vary
Personals of partner(s), gifts, borrowed, and others may vary
Purchase of stocks
Examples of business Ownership
Answers will vary
South Railroad Limited Partnership
Eden Limited Partnership
Bank of America Corporation
Lowe’s Home Improvement Store
Examples of liabilities
Employment: Manager fires an employee that missed significant days from work
Accidents and injuries on premises: Costumer breaks a leg while on business property
Accidents and injuries on premises: Driver runs into a building while driving company’s car
Product-related: Toddlers are easily injured by a sharp edge of a toy
Errors and omissions: Employee accidently damages a costumer’s property
Directors and officers: One food ingredient that may cause cancer is intentionally omitted from package

5. Other types of Business Ownership
Types of Partnerships
Dormant partner
General partner
Limited liability partner
Secret partner
Silent partner
Specialized corporations
Subchapter/S-corporation
Limited Liability company
Non profit corporation
Cooperatives
A business that is owned and ran jointly by its members
Franchise
When a company allows other businesses to sell its goods for a share of the profit
Ex. McDonald’s chain restaurants

6. 2.01 Understand The Types of Business Ownership Questions
By. Dana C. And Hannah D.

7. 1. Tami prefers working alone in her auto body shop and being in control of the daily activities. This type of business ownership ADVANTAGE over corporation is:
2. Mary owns stock for several companies, which she plans to pass ownership to her grandchildren. She chose this form of ownership over sole proprietorship because of the ADVANTAGE of:
Control of Decisions.
Potential of Unlimited Life.

8. 3. Tami opened an auto body shop after repairing a couple of cars to the high satisfaction of customers. She has experienced which ADVANTAGE over a corporation?
4. Tami wants to invest money in shares of stock. She would have to pay taxes on her earnings twice. Which is an ADVANTAGE of a sole proprietorship over a corporation?
Ease of Formation.
Single Taxation.

9. 5. Todd decided to form a corporation instead of a sole proprietorship because of which ADVANTAGE listed below?
6. Hank has ownership, even without liability over his initial investment, along with George for a local business. This is an example of what type of business ownership?
Limited Liability.
Partnership.

10. 7. Even though a company may sell shares of stock, it relies on a central body of people for financial directions. This is an example of type of business?
8. Chun purchased 150 shares of stock in the Panasonic Company. How many votes will she have at the next stockholder’s meeting?
Corporation.
150

11. 9. Carlos ignores minor decisions in his business even though his name is on the sign as one of the owners. This is an example of which type of business ownership?
10. Several small businesses that sell organic foods have joined together to increase their chances to pay lower prices for inventory. This is an example of what type of business?
Partnership
Cooperative.

12. 11. Since Jane’s corporation has become so popular, she has decided to allow other businesses to sell her products. This is an example of what type of business?
12. Both Bob and Jeri contributed to the expansion of their business to sell more brands of tires. They both experienced which ADVANTAGE of a partnership over a sole proprietorship?
Franchise.
More Capital Available.